Shultz Sees O’Neill in Effort to Smooth Over Flap With Envoy : Critical Cable From Ambassador to Argentina Leaked to Newspaper

Secretary of State George P. Shultz went to see House Speaker Thomas P. (Tip) O’Neill Jr. today to try to smooth over a dispute between the irked congressman and the U.S. ambassador in Argentina, U.S. officials said.

The officials, who asked not to be identified, said the dispute--which exploded when the Washington Post today published a cable from Ambassador Frank Ortiz highly critical of O’Neill--was highly embarrassing to the government.

“It couldn’t have come at a worse time, just when the Administration is putting all its efforts into getting the aid package passed,” one official said, referring to a $100-million request for aid to so-called contra rebels fighting the leftist Sandinista government in Nicaragua.

O’Neill said today Ortiz was rude and acted improperly when the Massachusetts Democrat and other House members met Argentine leaders two weeks ago.

The officials said the Ortiz cable attacked O’Neill and other members of his delegation, accusing them of trying to press Argentine leaders into condemning Washington’s bid to finance weapons for the contras.

The House has voted against the proposal once and is due to consider it again next week. The Senate voted for the proposal by a narrow margin.

President Reagan, in a televised news conference Wednesday night, made a fresh appeal to the House to pass his proposal, saying Nicaragua would not make peace with its neighbors or install a democratic government without more pressure. (Story, Page 13.)

He said Nicaragua and its Soviet and Cuban allies were determined to turn Central America into a “communist enclave.”

State Department spokesman Bernard Kalb refused comment on the content of the cable and condemned its leak to the newspaper.

Ortiz “continues to enjoy the confidence of this Administration,” he said.

Kalb said it was routine for an ambassador to report to Washington on conversations between congressional delegations and foreign leaders.

The officials, however, said it was not usual for an ambassador to make strongly critical remarks of congressmen in a cable, even one marked classified, which would have relatively wide circulation in Washington.

Such criticisms would normally be made through “back channels,” reporting routes with very limited circulation, they said.

O’Neill is a strong opponent of aid to the contras but there is a long American tradition of bipartisan support for U.S. foreign policy.

“From the moment we arrived, our ambassador was kind of resentful that I was there,” O’Neill told reporters.

“There was a rudeness about him, to be perfectly truthful. In our meetings, he constantly interfered,” O’Neill said.

“There’s no question our ambassador to Argentina broke every rule,” he said.

O’Neill said he and other congressmen went to Argentina at the invitation of President Raul Alfonsin and held frank and open meetings with Argentine officials.

He said there was strong opposition to Reagan’s Central American policy in Argentina and elsewhere in South America.

O’Neill said he did not think Secretary of State Shultz had anything to do with Ortiz’s actions.